How to achieve financial freedom: What is financial freedom for a family? It is accumulating enough money at a certain age to cover lifelong expenses and meet the requirements of financial goals at the family level.
You have probably already planned your finances and invested money in certain products, but it is very important to check if this plan is taking you on the right path to financial freedom.
The comprehensive plan generally incorporates a combination of several investment schemes to achieve the goal of financial independence.
Let’s understand this with the example of a marriage of about 30 years with a child seeking financial freedom.
Their current income, expenses and investments at the family level are as follows:
| Salary (after taxes) | Rental income | Dividend income | Total revenue | |
| during the year | 38.00.000 | 6.00.000 | 3.00.000 | 47.00.000 |
Chart courtesy of Finnovate
How to achieve the passive income target of Rs 2.50 lakh and a corpus of Rs 28.30 crore
Nehal Mota, Co-Founder and CEO, Finnovate, says, “The family’s stated goals (before adjusting for inflation) are to accumulate (i) a passive income of Rs 2.5 lakh per month for retirement; (ii) the goal of higher education for the child and a wedding worth Rs 1 crore and Rs 25 lakh respectively.
To achieve this target, the total family assets should be Rs 28.3 crore (cumulative of all targets), keeping the secondary property of Rs 1 crore intact.
For this, with an annual allocation of Rs 16 lakh (increasing by 5 per cent every year) and a CAGR target of 11 per cent, below is the scheme for them to achieve their goals.
| Assets | Current mix | Recommended mix | Systematic investments (annually) | Observation |
| Equity | 50% | 75% | 60% | Basic objectives and risk profile |
| Mutual Funds | 40.00.000 | 55.00.000 | 12.00.000 | |
| Stocks | 20.00.000 | 35.00.000 | ||
| Debt | 50% | 25% | 40% | Basic objectives and risk profile |
| Fire Department | 60.00.000 | 16.00.000 | ||
| Captivity | – | 10.00.000 | ||
| FPP | – | 3.00.000 | 3.00.000 | 1.5 lakhs per PAN |
| National Health Service | – | 1,00,000 | 1,00,000 | 50,000 for PAN |
| Total financial assets | 1,20,00,000 | 1,20,00,000 | 16.00.000 | |
| Secondary property | 1,00,00,000 | 1,00,00,000 |
Chart courtesy of Finnovate
Nehal says: “It is essential to periodically review and rebalance based on market conditions as well as proximity to goals. The key is to align products with investors’ needs and risk profile.”
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